Equities Trying to Rebound and Dollar Slips a Bit Ahead of Wednesday’s FOMC Announcement
September 21, 2021
The dollar is down 0.15% against the DXY weighted index. Dollar/yen is unchanged from Monday’s closing level, and the greenback lost 0.1% overnight against the euro and sterling and 0.4% relative to the loonie and Swiss franc.
U.S. stocks had suffered their steepest daily loss on Monday since May, and share prices in other markets had been battered, too. In Japan, which observed Respect for the Aged Day yesterday, the Nikkei-225 fell 2.2% today. Markets in China, South Korea, and Taiwan remained shut today, but share prices rose 0.7% in Singapore, 0.5% in Hong Kong, and 0.4% in Australia. European markets prior to the U.S. open had recovered today by slightly over 1.0% in Germany, France, Italy, Spain and Great Britain, and U.S. futures were up around 0.7%. Investors are somewhat less worried about the ramifications of China’s second largest real estate developer, Evergrand, possibly defaulting.
Today’s U.S. economic data releases revealed
- A $190.3 billion U.S. current account deficit in the second quarter, equal to 3.3% of GDP and little changed from the first quarter’s downwardly revised deficit of $189.4 billion. The 2Q gap was very close to analyst expectations.
- Rises in August of 3.9% in housing starts to a 2-month high and in building permits of 6.0% to a 4-month high. Improvement exceeded expectations.
Ten-year sovereign debt yields are a basis point higher in the United States but fell a basis point today in Germany, Japan and the U.K..
The prices of WTI oil and gold traded up 1.0% and 0.3% so far today.
Central banks in Sweden, Indonesia and Hungary completed monetary policy reviews. Investors are looking ahead to Wednesday’s Japanese and Fed policy statements and press conferences.
The National Bank of Hungary‘s key policy rate, which was raised by 30 basis points at each of the three previous monthly reviews, was lifted today by a smaller-than-forecast 15 basis points to 1.65%. The rate had been at a record low 0.60% from July 2020 until June 2021.
Bank Indonesia’s 7-day reverse repo rate has been left unchanged at its record low level of 3.5%. There were cuts of 25 basis points most recently in February and during 2020 in February, May, June, July and November. A released statement today characterizes Indonesia’s recovery as gradual and inflation as low. The rupiah has reversed some of its prior losses, and the balance of payments is predicted to “remain solid.”
The Swedish Riksbank’s repo rate had been at zero percent since a 25-basis point hike in December 2019. Its low-point of -0.50% had prevailed prior to an initial 25-basis point increase in December 2018, which had been the rate’s first rise since 2011. This month’s review of monetary policy kept the zero percent repo rate level and reauthorized bond buying during the coming quarter that will reach a cumulative SEK 700 billion at yearend. A statement from the central bank executive board today claims, “the Swedish economy has recovered quickly and inflation is expected to become temporarily higher than 2 per cent in the coming year, before falling back again. Monetary policy needs to remain expansionary for inflation to be lastingly close to the target going forward.” Officials are not expecting to raise the interest rate until after mid-2024, but additional quantitative stimulus is not expected next year.
The OECD published its interim economic outlook. GDP growth in the Group of Twenty economies as a whole is projected to 6.1% this year and then 4.8% in 2022, but performances will be highly uneven. Growth in 2021, for instance, is forecast at 6.0% in the United States, 8.5% in China, 5.3% in Euroland, but only 2.5% in Japan.
Minutes from the Reserve Bank of Australia‘s policy review early in September do not expect the 0.1% official cash rate to be lifted before 2024. GDP likely contracted in the third quarter of 2021 under the weight of Covid containment measures.
Britain’s monthly industrial trends survey revealed a record high orders index of 22, up from readings of 18 in August, -8 in April and -38 back in January.
Sweden’s seasonally adjusted jobless rate climbed 0.4 percentage points to 8.8% in August. Finnish unemployment of 6.5% in August was at a 20-month low.
The Swiss trade surplus posted a record high of CHF 4.47 billion in August.
South Africa‘s leading business cycle index dropped 2.5% in July after a slide of 4.4% in June. There had been four straight monthly increases previously.
Polish retail sales in August were 10.7% greater than a year earlier.
Justin Trudeau won reelection in Canada’s parliamentary election on Monday but failed to achieve his goal of securing a majority. The seat total of the Liberal Democrats will be essentially unchanged from what they had the past two years, and the lack of a majority has hampered the prime minister’s hopes of getting tougher anti-pandemic measures in place. On Canada’s data front, new home prices climbed 0.7% on month and 12.2% on year (up from 11.9%) in August.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, Justin Trudeau, National Bank of Hungary, Swedish Riksbank, U.S. current account